Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Tuesday, August 19, 2014

New-Keynesian Phillips Curve with Bertrand Competition and Endogenous Entry

Federico Etro (Department of Economics, University of Venice Ca' Foscari) and Lorenza Rossi (Department of Economics and Management, University of Pavia) discuss New-Keynesian Phillips Curve with Bertrand Competition and Endogenous Entry.

ABSTRACT: We derive a New Keynesian Phillips Curve under Calvo staggered pricing and price competition. Firms strategic interactions induce price adjusters to change their prices less when there are more firms that do not adjust. This reduces the slope of the Phillips curve and generates an additional source of real rigidity that magnifies the impact of monetary shocks on the economic activity. Endogenous entry amplifies the impact of both monetary and real shocks. We study the design of the optimal Taylor rule in the case of a fixed number of firms and we characterize the optimal monetary policy to restore the social planner allocation and the optimal Ramsey steady state in the case of endogenous entry.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/08/new-keynesian-phillips-curve-with-bertrand-competition-and-endogenous-entry.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef01a511e041fe970c

Listed below are links to weblogs that reference New-Keynesian Phillips Curve with Bertrand Competition and Endogenous Entry:

Comments

Post a comment